Price hikes throughout the semiconductor supply chain are starting to affect all industry verticals and eventually are going to make their way to product end users--both consumers and enterprises--according to industry experts who spoke this week at Sensors Converge.
“All verticals are being affected,” Joesph Bousaba, general manager and vice president, Motion and Pressure Business Unit, at TDK Invensense, told Fierce Electronics editor Matt Hamblen Thursday during a Sensors Converge session. “Demand is high, supply is down, so pricing goes up. Price hikes are coming from all parts of the supply chain. At the end of the day it’s going to get to the consumer. It’s not going to kill verticals, but it affects everybody.”
Fellow session speaker Yashar Shahabi, senior vice president of Digital Solutions, Sourceability, added that the Covid-19 pandemic doesn’t deserve all the blame for the current state of affairs in the chip supply chain, though it did “exacerbate” a situation in which new technology trends in many industries in recent years had been driving demand upward, testing the ability of the supply chain to keep up.
“The semiconductor industry goes through massive allocations [of chips toward new applications] every few years,” Shahabi said. “The signs were there back in 2017 and 2018. A lot of new technologies were coming in. A lot of different things started coming together, geopolitical issues and Covid exacerbated the situation, and now you have pricing hikes, and it’s all leading toward inflation.”
Price hikes, combined with growing lack of product availability, could make the buying process more painful for consumers and businesses.
Bousaba joked that the sticker price on a new car once served as the starting point for the consumer to start negotiating the purchase price of the vehicle downward, whereas now it could be viewed as a pledge of good faith from the seller not to charge the consumer more what’s on the sticker.
He added that his company is still seeing more demand than it has supply, and agreed with an increasing number of industry observations that things may not change until 2023.
That sort of timeline could drive many companies in need to consider ways to work around shortages and higher prices for some components by committing to reengineering projects for their products, but Shahabi said reeningeering is “extremely costly” itself, so “not a way to get around the increasing prices. That really doesn’t seem to be an option.”
Instead, a semiconductor industry and supply chain that spent decades globalizing and becoming more distributed is now looking to appease governments in individual countries by focusing on bringing new capacity online in those particular nations, so that unforeseen circumstances half a world away don’t completely shut down supply. But that new capacity may not come online soon enough to save end users from paying more.
Here is the complete chip shortage panel discussion with Bousaba, Shahabi and Hamblen at Sensors Converge in San Jose, California on Sept. 23: